Rise of the Internet in China

July 17, 2017

Rise of the Internet in China
By Jasmine Leung

Notorious for its strict Internet control, China has been carrying out the project of the Great Firewall in order to ensure the activities online are within the boundaries of providing legitimacy to the Beijing Government. Nevertheless, the development of China’s internet has yet to be stifled by the suppression of freedom of expression. Aspects where political issues are untouched, Chinese entertainment and transportation have been grasping the gains from this golden age of rapid Internet development, compounded by the active government involvement of promoting e-commerce.

Growth of China Internet Users and its Usage

According to the latest report on Internet Trends 2017 by Mary Meeker, China is home for the largest Internet market across the globe. With the rapid expansion of technology companies in China, these private enterprises have extended their businesses in creating public market wealth. They have covered social aspects from finances and information technology to topics as broad as the significant impact on the living through consumer staples and health care. Internet user growth has been rising since 2008, recording a total of 700 million users in 2016. The rate of China’s mobile Internet usage has been increasing since 2012 compared to 2016’s record of having over 2500 million hours spent daily. This reveals that China is currently in a state of healthy Internet development, where the progress of usage outpaced the surge of users by a large extent.

Online Innovation: Consumer Engagement

Among the medium used by Chinese netizens, one can see that Internet usage in desktop and mobile accumulated 55 percent of time spent in contrast to radio, television, magazine and newspaper in 2016. Particularly, the boost of online innovation has been focused on consumer participation, allowing them to conveniently pay online. In regard to the entertainment industry, online engagement like games and livestreaming has captured a wide audience in China.

Gaming Industry

In 2016, China has already surpassed the United States (U.S.) in earning the largest amount in global interactive game revenue. Companies like Tencent and NetEase have devoted their resources into the infrastructure of the gaming industry by becoming leaders of the multiplayer online battle arena (MOBA) in addition to the massive, multiplayer online role-playing games (MMORPGs). The game produced by Tencent, Honor of Kings, strategically targets the social nature of the gaming platform. Also, the simplicity of its user interface enables the company to harvest over 50 million U.S. dollars from daily active users. Meanwhile, NetEase appeals to Chinese netizens due to its mobile first mover advantage and social design of the software. Evidently, mobile innovation has benefited both companies with substantial revenue ever since.

Livestreaming Fad

Another interesting phenomenon that can be observed is China’s popularity of livestreaming. Livestreaming extends itself into a wide range of categories — singing, dancing, game playing and having talk shows included. The nature of livestreaming allows users to press “likes,” chat with friends online and interact with other hosts. It presents an excellent opportunity for businesses to grow, as users can purchase virtual gifts like “handclaps” and “crowns” to support their preferred performers. This compelling monetization from livestreaming could actually yield greater revenue than online games.

Behind the Consumer Engagement: Expansion of Mobile Payment

Using convenience as the major selling point, China’s mobile payments (payment conducted through online applications instead of cash and bank cards) are in the spotlight along with the swift development of China’s Internet. The low relative cost of mobile payment coupled with a helping hand of regulated interchange rates within the territory, appear to be a perk for facilitating small transactions. It also acts as a strong competitor among other payment alternatives like China’s banking cards and U.S. debit cards. By the end of 2016, the volume of China’s mobile payment had already reached over $5000 billion dollars, while the size of transactions remained small, with a majority below. This could be explained by the infrastructure of mobile payment designed by business leaders: Alibaba and Tencent. Both enterprises designed AliPay and WeChat Pay on mobile phones, which subsequently diverted the consumption pattern into micro payments. These payments are generally related to the on-demand bike and on-demand mobile recharge where they cost 15 cents approximately, as well as the tipping for articles online and livestreaming. In the context of China, mobile payment also engages with the traditional festival of the Lunar New Year, where netizens are able to give virtual red packets through WeChat pay by replacing physical envelopes. Not only does the mobile payment penetrate into local festivals and daily routines, but also it is transformed into a diversified financial service platform for users to manage their wealth and financial issues. This covers their insurances and traces their credit ratings and histories.

Mobile Payment Example: On-Demand Bike Sharing

Living in a densely populated country like China, transportation can be a headache for most of its citizens; traffic gridlocks are commonplace. Businesses arise when entrepreneurs raise their eyebrows towards the chance of developing on-demand transportation like bikes for people to share via mobile payment. This is especially true to Shenzhen Municipality. The mobile innovation has driven a significant usage ramp and generated user-friendly ways for commuters to operate the scheme on their smartphones. Led by the leaps and bounds of the development of the Internet world, on-demand bike sharing fully utilizes the GPS function on smartphones for users to track where to share a bike, rather than having a permanent physical station that hinders utilization. What makes this innovation exciting is the incredibly easy access of mobile payment through scanning QR codes to unlock the payment online.

E-Commerce in China

Recognizing the benefits of the business to consumer sales (B2C) where businesses are performed directly between the end-users of companies and consumers, China has been determined to adapt the model as the dominant drive for retail sales, surpassing the penetration rate among other counterparts such as Korea, Japan and the United Kingdom in 2016.

This can be attributed to the Chinese e-commerce company, Alibaba Group, for its massive expansion over e-commerce. Its branches like Taobao application is notable for its livestreaming and microblogging capacities in spurring the participation online. In 2016 alone the growth of monthly active users soared to a 24 percent increase. Cainiao is also an example of this kind of personalized application that serves the purpose of smart labeling and routing the packages consumers bought online from Taobao. As such, the gross merchandise value generated in 2016 was thrice higher than in 2015. At the same time, algorithmic mobile newsfeeds like Toutiao, Baidu and Weibo those of which aim at personalization likewise join to enjoy the gains of Internet development. As a result, China’s online advertising revenue on these newsfeeds is estimated to reach over $6000 million dollars in 2017.

The rise of China has been a heated debate in the political field. With stronger recognition towards the power of the Internet, this is no exception to the rise of the Internet world in China.